EFFICIENCY BY TRUST IN FAIRNESS - MULTIPERIOD ULTIMATUM BARGAINING EXPERIMENTS WITH AN INCREASING CAKE

Previous ultimatum bargaining experiments have shown that bargainers f ace the conflict whether to exploit bargaining power or to comply with basic norms of distributive justice. In multiperiod ultimatum bargain ing for an increasing cake, trust in fairness can enable cooperation a nd thus more efficient results but is also open to opportunistic explo itation. In such a game the two players take turns in being the one wh o suggests an agreement and decides whether this is the final proposal , whereas his partner can only accept this proposal or reject it. Whil e the game theoretic solution implies an immediate agreement assigning nearly all the cake to the demanding player, efficiency requires to p ostpone the agreement to the last possible round. Our 2 x 2-factorial design varies the number of possible bargaining periods and the cake i ncrease, allowing us to explore several hypotheses.